United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
A. ROSS, UNITED STATES DISTRICT JUDGE.
matter is before the Court on the motions of Defendants
Ashley Energy, LLC ("Ashley Energy"), Miller Wells,
PLLC ("Miller Wells"), Power Investments, LLC
("Power Investments"), and Mason Miller
("Miller") to dismiss (Doc. No. 19) and for leave
to file an under seal (Doc. No. 22). The motions are fully
briefed and ready for disposition. For the reasons set forth
below, Defendants' motion will be granted.
October 27, 2017, Plaintiffs SL EC, LLC ("SLEC"),
Michael Becker ("Becker"), and Davis & Garvin,
LLC ("D&G") filed their complaint in Missouri
state court concerning transactions related to the purchase
of assets of a power plant. Defendants removed the case to
this Court on the basis of diversity jurisdiction on November
complaint provides that D&G, a law firm, was hired by
SLEC to represent SLEC in connection with the negotiation,
acquisition, and purchase of the assets of a power plant.
Plaintiffs claim that in August 2017, SLEC entered into an
agreement with Power Investments to sell SLEC's interest
in Ashley Energy, LLC, with the option to acquire the power
plant, and to release a loan obligation between Becker and
others (the borrowers) and Miller and Power Investments (the
lenders). Plaintiffs assert that Ashley Energy borrowed over
$8, 000, 000 to fund the acquisition and transferred nearly
$480, 000 to Miller Wells and Miller.
assert five counts against Defendants. Count I for breach of
contract alleges that D&G and Ashley Energy entered into
a written "fee agreement" for legal services, which
Plaintiffs assert was breached by Ashley Energy when it
refused to pay D&G's legal fees. Count II for breach
of contract alleges that Becker and SLEC entered into a
written purchase agreement with Power Investments, and that
Power Investments anticipatorily breached that contract.
Count III alleges that Ashley Energy fraudulently transferred
approximately $480, 000 to Miller Wells and Miller, thus
rendering Ashley Energy unable to pay Plaintiffs the amounts
they claim they are owed under Counts I and II. Lastly,
Plaintiffs allege in Counts IV and V that they are entitled
to the imposition of a constructive trust over Ashley
Energy's assets and to pierce Ashley Energy's
corporate veil as the result of the alleged fraudulent
their motion to dismiss, Defendants argue that Count I fails
as a matter of law because the fee agreement at issue does
not include Ashley Energy as a party. Defendants further
argue that Counts II thorough V should be dismissed because a
final, non-appealable judgment has already been entered
against SLEC and Becker in a Kentucky state court proceeding
regarding the same transactions at issue in this lawsuit. The
Kentucky state court entered a default judgment in favor of
Power Investments against SLEC and Becker and made a number
of factual findings. Defendants argue that these findings
have res judicata effect and that any other claims Plaintiffs
may have regarding the transactions at issue should have been
raised as compulsory counterclaims in the Kentucky state
action. Defendants also filed an unopposed motion for leave
to file under seal the purchase agreement upon which
Plaintiffs base their breach of contract claim against Power
Investments. (Doc. No. 22). In support, Defendants contend
that the parties agreed to keep the terms of the purchase
agreement confidential when they entered into the contract.
their opposition to the motion to dismiss, Plaintiffs concede
that the allegations contained in Count I require refinement
in light of federal pleading standards, and Plaintiffs stated
that they would seek leave to amend their pleading.
Plaintiffs then argue that the Kentucky state action is not
final because Plaintiffs have a pending motion to set aside
the default judgment. Plaintiffs contend that "[s]hould
the existence of that default judgment be eliminated - and
Plaintiffs believe it will be shortly - this case may well
have primacy relative to the Kentucky action." (Doc. No.
29 at 2).
survive a motion to dismiss brought pursuant to Federal Rule
of Civil Procedure 12(b)(6), a claim "must contain
sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face, ' "
meaning that it must contain "factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). The reviewing court must accept the plaintiffs
factual allegations as true and construe them in plaintiffs
favor, but it is not required to accept the legal conclusions
the plaintiff draws from the facts alleged. Id. at
678; Retro Television Network, Inc. v. Luken
Commc'ns, LLC, 696 F.3d 766, 768-69 (8th Cir. 2012).
Ultimately, the question is not whether the claimant
"will ultimately prevail... but whether his complaint
[is] sufficient to cross the federal court's
threshold." Skinner v. Switzer, 562 U.S. 521,
in their opposition do not dispute that Count I fails under
the federal pleading standards and state that their
allegations "should be refined." On May 14, 2018,
Plaintiff D&G filed a notice of dismissal of its action
against Ashley Energy, which were encompassed within Count
Count I will be dismissed without prejudice.
regard to Counts II through V, Defendants maintain that the
doctrine of res judicata bars Plaintiffs from asserting those
counts before this Court. Indeed, Plaintiffs concede that
"the Kentucky Default Judgment... prevents the
Plaintiffs from proceeding on Counts II thought V of their
Petition." Doc. No. 29 at 1. Plaintiffs argue, however,
that a motion to set aside default judgment is pending before
the Kentucky state court which, if granted, may result in
this case having "primacy" relative to the Kentucky
default judgment operates as res judicata and is conclusive
of whatever is essential to support the judgment. Kapp v.
Naturelle, Inc.,611 F.2d 703, 707 (8th Cir. 1979).
Here, the Kentucky state court entered a default declaratory
judgment that the written purchase agreement is enforceable
against SLEC and Becker; that Power Investments has satisfied
its full obligation to release, waive, cancel and surrender
the Power Investments loan and deed of trust; that neither
Power Investments nor Ashley Energy had assumed any
responsibility for the payment of legal fees or other
undisclosed liabilities except as otherwise set forth in the
agreement; and that Power Investments has not ...